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Six signs for success

published: January 4th 2008
by: Kindra Gordon

As you prepare for the new year, how can your ranch determine if it is successful? It takes a balanced approached in these six key areas.

Barry Dunn, former South Dakota Extension livestock specialist and now at the King Ranch Institute for Ranch Management in Texas, has been a long-time student of evaluating why some ranch operations are more successful or viable than others. From his own ranching experience to his years in extension education, Dunn has amassed an insightful understanding for the variety of factors that can impact a ranch.

He advocates that critical to any business success is the ability to monitor and measure. Dunn suggests ranch businesses use a balanced scorecard to help achieve sustainable long-term success. The scorecard looks at the ranch from six different perspectives: 1) learning, 2) natural resources, 3) cattle, 4) customers, 5) financial and 6) people. All categories are important and no single area should outweigh another.

This management tool is based on “The Balanced Scorecard” first developed by Robert Kaplan and David Norton in the early 1990s and used successfully in many business applications. By using both lagging and leading indicators, the scorecard measures the progress of an organization toward its vision from multiple perspectives.

Essentially, Dunn des-cribes this evaluation process by suggesting producers approach it as if they were putting a report card together for their ranch. The “report card” should access how the ranch is doing in each of the six different areas.

Making The Grade

Learning. To evaluate how the ranch is doing in the “learning” category, Dunn suggests that ranch operators set goals to attend educational events and seminars and then evaluate if they meet those goals during a given timeframe.

As examples of opportunities to enhance learning, Dunn says, “I would encourage ranch owners and managers to attend beef seminars and conservation and range tours, as well as use different websites as resources. You may even take a course in business.”

He adds, “The ability of a company to build its intangible assets or intellectual capital has become a critical success factor in creating and sustaining a competitive advantage.”

Natural Resources.  When looking at a ranch from this perspective, Dunn says key indicators of success have been to match stocking rate and carrying capacity. But he adds, “The kicker about the range resource base is that carrying capacity is variable and stocking rates need to be. These need to fluctuate, but our industry has lost the flexibility to do that.”

Thus he says, “Liqui-dation of cows can’t be viewed as a disaster. It needs to be considered part of the normal business of ranching.”

So in evaluating your success in this category, Dunn stresses that the ability to be flexible and adapt to resource conditions is key. As an example, he says track precipitation and if it isn’t above normal by July, you need to be able to destock because the forage production for that season is already set.

Additional resource factors to track include improvement in range condition, wildlife populations, and cattle performance.

Cattle. How do we measure success in cattle? Everyone seems to have their own opinion, but Dunn says first priority to him is to measure pounds weaned per cow exposed. “That’s the measure of efficiency. It’s the whole package,” he says.

He says that number is a true summary of genetic potential, reproductive performance, death loss and herd health, and pre-weaning nutrition from milk, pasture and supplement.

Other indicators Dunn advocates monitoring within the herd include pregnancy rate, replacement rate, cow body condition score at weaning, and the number of days hay was fed over the winter.

Customer. In any business you’ve got to know who the customer is and if their needs are being satisfied. For ranchers to “listen” to customers, Dunn suggests getting involved in retained ownership programs or marketing alliances where information is passed up and down the market channels. By doing so, ranch operators will have the opportunity to monitor feedback, as well as identify if there are repeat customers and how much customer inquiry is produced.

Financial. When evaluating a ranch’s financial success, Dunn advocates calculating a unit cost per 100 lbs. weaned. Of the more traditional means of calculating a breakeven on per cwt. of weaned calf basis, Dunn says, “That’s been abused, and something we’ve got to move beyond. It’s not a per cow cost measure.”

Dunn also advocates that ranchers calculate Return on Assets which measures the percentage return, regardless of source, to each dollar invested in the operation, and Net Income which is the money available to the operation to pay off debt and for family living.

People. At the heart of a ranch is the people and their quality of life. Dunn admits, “Ranching is a tough business, but it also can be an enjoyable business,” he says. When looking at a ranch from this perspective, determine if the people involved are healthy, have a sense of security, and have minimal stress. General family relations and employee turnover should also be monitored.

Strive To Improve

As a final tip in putting your scorecard together, Dunn says when evaluating these categories you need to be able to identify leading and lagging indicators. “Lagging indicators are in the past, and you can’t change them – such as a diploma or a photo point. Leading indicators you can change and improve upon, and may offer tremendous opportunities,” he points out.

Dunn concludes, “You want a balanced scorecard, and it builds from learning on through to people. The better job you do at being a life-long learner, the better you’ll be able to meet your cattle, natural resource, financial, customer and people goals.”

Editor’s Note: To assist ranchers with implementing this balanced approach, Barry Dunn and his colleagues have developed the Balanced Scorecard Ma-nual for ranch management. It is available online at http://agbiopubs.sdstate.edu/articles/EC922.pdf.